Trade Articles

After the budget announcement of writing off loans in agriculture, the UPA government is all set ready to give new gift package to the agricultural sector by decreasing the price of some of the fertilizers varieties by an average of Rs 1416($33) per tonne. The announcement in this regard was made by the finance minister Mr. P Chidambaram. The new policy will fix down base price for 17 items and it will cover the long duration of time instead of yearly earlier. India is the world's 3rd largest fertilizer consumer. The move was overdue as the industry was insisting the government for treating the indigenous diammonium phosphates(DAP) at par with the imported DAP. Indian companies sell fertilizers at the prices set by the state which are further subsidized by the government in the short fall that would arise because of the cap on prices.

The government move is aimed towards decreasing the fertilizer prices for ensuring its sufficient availability to the farmers. This will help in decreasing the over burdening of farmers on particular fertilizer type. The uniformness of subsidy regime will make fertilizers price uniform at all places. As per the estimates of the Fertilizer Secretary Mr. J.S Sharma, the new fertilizer policy will help the government in saving Rs 1,163 crore. In this, farm gate prices of each nutrient will remain same and government will decide the price of fertilizer on the basis of their nutrient value instead of their branding. It is a shift from product based to the nutrient based pricing. No change has been introduced in the MRP as the government thinks they are already at their subsidized rates.

The new policy emphasizes in uniforming the prices of single super phosphate fertilizer (SSP) based on the nutrient value in all over india. The sky rocketed increase in prices of fertilizers has emerged out as the serious challenge for the government in assuring their easy availability. The government is interested in maintaining the right pool of fertilizers use so that farmers depend not only on the NPK & SSP varieties and also move towards the complex fertilizers. Prices of other fertilizers like urea etc will remain unaffected. The fertilizer department of the government will be authorize to make revision of the prices of sulphur as per the international price structure. Subsidy is being paid to the DAP domestic producers and after the policy it would be link with the price at which the fertilizer is being imported. Mr. J S Sharma said that the said move will help in bringing price of various fertilizers ingredients at the same level of the international arena. Depending on the negotiations, if the domestic fertilizer units make some savings then it would be divided between the industry and the government in the ratio of 63:35.

The industry has evoked mixed reaction in response to the new fertilizer policy. One segment welcomed the UPA fertilizer policy but other showed their unhappiness for neglecting the fertilizer subsidy. The fertilizer output in the country has been stagnated at 21 million tonnes with no new investment made in this direction. For compounding the matters, the policy was actually skewed towards the urea, which in turns resulted into inappropriate usage of fertilizers. The optimum ratio between nitrogen, phosphorous and potassium should be 4:2:1 but in many cases it has been changed into the 20:6:1. This drastic change in the fertilizer ratio has led to the inefficient usage of the fertilizers with a declination in the productivity level in the per kg of fertilizers used. The new policy is aimed towards rectifying this ratio by facilitating the price indexing through the main ingredients instead of branding.